PayNet recently issued their quarterly Small Business Credit Outlook, which tracks trend analysis of several operational indicators in the small business sector, including its business cycle, investment activity, and credit performance. Their report offers commercial lenders insight into how marketplace credit risk can be forecasted in various regions and industries.
Through the fourth quarter of 2014, healthy double-digit small business investment improvements were noted in Florida, Texas and California, primarily due to borrowing in transportation and construction companies to expand capacity.
Further, based on PayNet’s analysis, large economic segments retain plenty of room to grow. Based on current investment volumes, real estate (+58), construction (+55%), retail (+30%), and manufacturing (+29%) each have broad upside opportunities for improvement to reach previous high investment levels.
Confidence in this expansion phase of the economic cycle is based on the strong financial condition of small businesses. Loans 30+ days past due improved slightly in December, 2014, with delinquencies falling by 1 basis point to 1.24% compared to November. Companies are observed maintaining strong balance sheets, probably due to the relatively recent memories of the stress experienced during the Great Recession.
However, loan delinquencies in North Dakota (+0.30%), Texas (+0.17), and Pennsylvania (0.07%) rose higher than national averages, compared against 0.07% for the U.S. Clearly the impact of lower oil prices has quickly translated into higher financial stress in the general and construction segments of these state economies.
The Midwest region continues to reign as the lowest loan delinquencies, while the Southeast continues to exhibit the highest delinquencies. Florida (1.68%) and Georgia (1.54%) delinquencies are the highest and remain well above the national average of 1.24%.
Verdict? PayNet sees business conditions remaining favorable for small business credit in 2015, with this significant segment of the U.S. economy, assuming some of the economic load as overseas markets decline. The business cycle remains in expansion mode at low risk, and while lending activity and the accompanying business investment have slowed, it remains at a healthy pace.
The financial health of the sector seems excellent, with loan delinquencies falling slightly. Read the entire report here.
PayNet is a leading provider of small business credit ratings for lender risk management. The company maintains the largest proprietary database of small business loans, leases, and lines of credit, encompassing over 23 million financing contracts with a face value of more than $1.3 trillion.
With state-of-the-art analytics, PayNet converts data into real-time marketing intelligence and predictive information that subscribers use to make informed financial decisions and improve business strategy. PayNet’s capabilities include historic credit-reporting, credit-scoring, portfolio risk measurement, default forecasting, peer benchmarking, and critical industry trend analysis.
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